In this article, we will talk about how important it is to set up and define a careful analysis of the running costs of a workshop
The ordinary management of a workshop, as well as of a company, passes through a whole series of aspects. One of the most important is certainly economic management.
Put simply, we need to make ends meet.
In addition to revenues, it is essential to observe and analyze costs with extreme care. This is not an aspect that can be put in second place, as it defines year-end profit. Having very high ordinary operating costs inexorably leads to a situation of significant economic suffering within the workshop.
Let's start with the simplest aspects, namely the definition of costs. To have a careful overall analysis, we must first understand which type of cost affects our business the most.
In fact, there are fixed costs, but also flexible ones . Fixed costs are all costs that are incurred independently of turnover. Do we generate 100,000 euros or 200,000 euros per month? Fixed costs do not vary. The opposite is true for flexible costs, which tend to depend on the volume of production. We can think, for example, of the costs of production, shipping, packaging and so on.
Do we produce 100,000 euros in monthly turnover? We will have a very different level of flexible costs compared to a turnover of 200,000 euros.
But be careful! Costs can also be classified according to another aspect. In fact, we have direct and indirect costs! What are? The former are those linked to raw materials… while the latter are those that cannot be linked to a product or a production phase. In fact, they concern the production process in its entirety.
At this point, and understood what are the main types of costs in a company (and therefore in a workshop), we must now think about setting goals. The reason? Well, after defining how much a manufacturing process or the management of a production process costs us, we need to understand where we need to go.
In fact, let's try to understand what cost reduction goal our workshop can achieve. Not all workshops are the same and it is in fact impossible to define a goal that is valid for all.
A simple example is this: everyone can walk, but not everyone can run the 100 meters at the Olympics. Each has its own structure, history, know-how and propensity to save.
However, let us remember that going to reduce the level of costs is not something that must be done only in times of crisis, but it is recommended to do it in every single day of the year and period of the company's life.
In fact, it is not certain that the crisis must necessarily force us to carefully review the cost levels and their size in the overall budget. A careful entrepreneur, in fact, analyzes his own structure, regardless of how the market is going.
Are there any doubts? We ask collaborators or people who work with us. It can sometimes happen that the vision of other people can help us to have a more complete picture. In fact, each of us has our own pattern of reasoning and seeing things.
Nobody has the perfect recipe in their pocket and talking with people in our workshop can help us to constantly improve it. It is up to us to choose the people who work with us who are adequately suited to carry out a complete analysis. Personnel care must not only be linked to an economic and technical competence issue, but it is always advisable to hire people who have a managerial vision of the workshop.
Once the costs have been identified, the cost reduction objectives defined… now we come to identify the areas of savings. Being able to create a certain level of savings at the end of the year means creating an economic and financial wedge that allows us to grow.
We speak very simply of the possibility of investing in new machinery, new courses, etc ... In other words, if you cut costs, you get a certain amount of money that can be reinvested within the business. Not bad, right?
Ok, but an example on which to intervene?
Let's start with the purchase costs. For example, we can look for cheaper material suppliers. We start from the simple paper of the printer, to the gloves, to the spare parts we install on the cars. Obviously, be careful not to decrease the quality level of the service.
Saving 10% on the total cost of a repair, but having an unhappy customer as the service is poor… is not very convenient. And it's not for one simple fact: we lost that customer. In fact, the risk is to see customers leave, for a relatively unintelligent reason, namely to reduce costs in every way ...!
We therefore try to identify the various costs that our workshop incurs every single day, and then go to reduce them in an intelligent way and with the right variation. We are not trying to cut costs in every way! We try to be balanced and not have the blindness to see how much quality is at risk.
And finally… we always try to keep constant cost control. We do not do this process once a year, but several times! Costs can change, for a thousand reasons, and we must not be surprised by any changes.
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